Lenders Write Off More Credit Card Debt

As job losses continued to mount, more and more consumers fell behind on their payments in November, Moody's Investor's Services reported Tuesday. Moody's Credit Card Index showed the charge-off rate on U.S. credit cards rose to 10.56%, up from October's charge rate of 10.04%. This reverses the recent downward trend in the charge-off rate, which had fallen in September and October.

The charge-off rate measures credit card account balances lenders have written off as uncollectable. This is calculated as an annualized percentage of total outstanding principal balance. The record-high of 10.76 percent was reached in June, but Moody's forecasts that charge-offs will peak between 12% and 13% in mid 2010, as more and more people join the ranks of the long-term unemployed.

The delinquency rate also rose slightly, reaching 6.2% in November from 6.1% in October. That includes all credit card payments that are between 30 days and 180 days late, but have not yet been written off. So far, the highest delinquency rate was seen in March when it reached 6.4%.

The only positive sign in this month's Moody's Credit Card Index was that the dollar amount of delinquent balances is lower than a year ago for cards issued by three of the six largest card issuers, even though the number of people paying late increased.

The amount that people paid towards principal also fell in November to 16.42% from 17.31% in October. The payment rate measures the average amount of principal that cardholders repay each month, measured as a percentage of total outstanding principal balance.

Credit card companies helped to create this mess by raising interest rates for millions of card holders to 29% and higher. As more and more people realized they were never going to be able to pay off their cards at such high interest rates, they decided to just stop paying their credit card bills. There is even a call for a National Default Day on Jan. 3, 2010.